The Trump administration laid out its vision for releasingFannie Maeand Freddie Mac from more than a decade of federal control, issuing a long-awaitedplanthat marks the government’s boldest step yet toward closing one of the final chapters of the 2008 financial crisis.The proposal released Thursday by the Treasury Department suggests dozens of reforms to protect Fannie andFreddiefrom another housing crash, shrinking their dominant market shares and creating new competitors to the companies that backstop about $5 trillion of home loans. Yet, it is only an initial step in what still would be a long and arduous road to freeing the companies from the government’s grip.

Ending the Fannie and Freddie conservatorships -- the federal shackles they’ve been under for more than a decade -- has long been a goal for Treasury, with Treasury Secretary Steven Mnuchin predicting just weeks after Donald Trump’s November 2016 election win that the incoming administration would “get it done reasonably fast.” But writing a report, a benchmark that it took him almost three years to hit, is arguably the easy part.

The task now gets much tougher. While Treasury has outlined broad goals, some of the trickiest questions about how to fix Fannie and Freddie remain unanswered. In a sign of the long process ahead, Treasury acknowledged that specific details involved in releasing the companies, such as determining how they will raise capital to weather an economic calamity, still need to be negotiated across multiple government agencies.

‘Protect Taxpayers’

“The Trump administration is committed to promoting much needed reforms to the housing-finance system that will protect taxpayers and help Americans who want to buy a home,” Mnuchin said in a statement. “An effective and efficient federal housing-finance system will also meaningfully contribute to the continued economic growth under this administration.”

In shaking up the nation’s housing-finance system, White House andTreasuryofficials would be taking a leap of faith that dramatic changes won’t disrupt the mortgage market.

Concern that a revamp might make home loans more expensive has made some in the Trump administration wary of bold moves before the 2020 election, people familiar with the matter have said. That’s because the health of the economy, which has recently shown signs of slowing, is perhaps the most important issue for Trump in securing a second term.

Treasury’s timeline was vague for implementing its recommendations, some of which would have to be approved by a bitterly divided Congress. Such political and technical hurdles indicate that the conservatorships probably won’t end anytime soon.

‘Remain Skeptical’

“We remain skeptical that much progress will be made in making it a reality, even with respect to the proposed unilateral actions, before next year’s elections,” analysts atBeacon Policy Advisorssaid of Treasury’s plan before its public release. If Trump losses, the “blueprint will likely fall out of favor as quickly as Trump leaves.”

Fannie and Freddie don’t make loans. Instead, they purchase mortgages from banks and other lenders and package them into bonds. Those securities have guarantees that protect bond holders from the risk of homeowners defaulting. The process provides ample liquidity for the mortgage market, keeping the housing sector humming and borrowing rates low. Evidence of Fannie and Freddie’s impact: the U.S. is an outlier in allowing consumers to obtain 30-year fixed rate mortgages.

The companies were taken over when the housing market soured, ultimately receiving $191 billion in bailout funds. They’ve since become profitable again, paying more than $300 billion in dividends to the Treasury in recent years.

The Trump administration contends that taxpayers will remain at risk as long as Fannie and Freddie are undercapitalized and in the government’s grip. The companies are currently barred from holding more than $3 billion in capital apiece to protect against losses, though in conservatorship, they have access to about $250 billion in Treasury funds.

Federal Backstop

Treasury’s stated preference is for lawmakers to approve comprehensive housing-finance reform. Only Congress has power to charter competitors to Fannie and Freddie, a move that would lessen their systemic risk. Treasury also wants Congress to create an explicit federal guarantee of Fannie and Freddie mortgage bonds. Bond investors have warned that they might stop buying the securities if the companies are released from U.S. control without an explicit backstop.

Yet lawmakers are split on the role of Fannie and Freddie. Democrats, who control the U.S. House, want the companies to help less-affluent borrowers buy homes. Many Republicans are resistant to such affordable-housing policies, and the most conservative GOP lawmakers don’t think the government should have any presence in the mortgage market. These divisions help explain why Congress hasn’t been able to agree on a Fannie and Freddie fix for more than a decade.

Should Congress again fail to come up with a compromise, Treasury’s plan includes a number of proposals that could on their own lead to Fannie and Freddie being set free. For instance, Treasury expects it will be necessary for the companies to maintain access to a government line of credit even if the companies exit conservatorship. Availability of such financing, in exchange for a fee, should assure bond investors that Fannie and Freddie mortgage securities have no credit risk, said a senior Treasury official.

Treasury also wants to set Fannie and Freddie on a path to raising capital, though beyond providing suggestions on potential avenues the companies could pursue -- such as retaining earnings, public share sales or private offerings -- the report is thin on details. Specifics on how Fannie and Freddie would rebuild their capital cushions, and how much money they need, still have to be negotiated between Treasury and theFederal Housing Finance Agency, the companies’ regulator.

Not Waiting

Treasury made clear in its report that “reform should not and need not wait on Congress.” The plan added that FHFA “should begin the process of ending” the conservatorships, though it provided an unclear timeline for specific steps.

“As we review the document, it reminds us that the ‘devil is in the details,”’ said David Stevens, the former head of the Mortgage Bankers Association. “Many of the critical details need to be fleshed out before stakeholders can truly opine on the long-term plan.”

Allowing Fannie and Freddie to retain profits would require halting or tweaking a controversial arrangement -- instituted in 2012 during the Obama administration -- that requires the companies to send virtually all their profits to the Treasury. As an interim step, the Trump administration may allow the companies to hold more capital without completely suspending the profit sweep, the senior Treasury official said.

Mnuchin, FHFA Director Mark Calabria and Housing and Urban Development Secretary Ben Carson are slated to testify on the plan Sept. 10 before the Senate Banking Committee. Senator Mike Crapo, the Idaho Republican who leads the panel, said in a statement Thursday that while he preferred to fix the U.S. housing finance system through legislation, “at the same time, it is important for the administration to begin moving forward on key administrative reforms.”

Senator Sherrod Brown of Ohio, the committee’s top Democrat, sharply criticized the report, warning that it would destabilize the economy, raise mortgage and rent costs and limit access to mortgages.

“I’m urging the president: Make it easier for working people to buy or rent their homes, not harder,” Brown said in a statement.

Eager Shareholders

One group that’s eager for the conservatorships to end is hedge funds such asPaulson & Co.,Blackstone Group Inc.‘s GSO Capital and Bill Ackman’s Pershing Square Capital Management that own Fannie and Freddie shares. Some have sued over the Treasury profit sweep, seeking to redirect at least a portion of Fannie and Freddie earnings to themselves. Thus far, their lawsuits have been unsuccessful.

For years, the hedge funds have urged both the Trump and Obama administrations to let Fannie and Freddie build up their capital buffers and then release the companies to private investors. Such a move, known as recap and release, would likely trigger a windfall for existing shareholders. While Treasury supports many aspects of a recap and release, its plan doesn’t seem to envision it happening quickly.

The report also raises the possibility of restructuring Fannie and Freddie through a controversial method: putting the companies in receivership, which is a form of bankruptcy. The tactic, which Calabria had previously called for before joining the FHFA, could wipe out many of the companies’ shareholders, depending on how it’s done.

Receivership is one of several options Treasury suggests should be considered to allow Fannie and Freddie to build capital. The agency does not specify its preferred approach, instead calling for an additional plan to evaluate various options.